FEMA Compounding: Faster Refunds & New Mandatory Fields
Current · Source: Reserve Bank of India · RBI/2013-14/176 · issued 12 Aug 2013 · ~1 min read
Quick answerRBI mandates NEFT refunds for returned FEMA compounding applications and adds PAN and NIC code 1987 as mandatory fields. Incomplete applications will be returned, so ensure all approvals are in place before submission.
The rule, in the simplest words
If you send a FEMA (foreign money rules) application that is missing approvals, the RBI will send it back and refund your fee through NEFT (direct bank transfer) instead of a paper cheque.
You must give your bank account details (like account number and bank name) when you apply, so the refund can be sent to your account quickly.
For FDI (foreign investment), ECB (foreign loans), ODI (overseas investment), and Branch/Liaison Office applications, you must include your income-tax PAN (tax ID number) and NIC code 1987 (activity type number).
If you forget to add your PAN or NIC code, your application will be treated as incomplete and sent back.
Tell the RBI if your address or phone number changes while your application is being processed.
How it plays out — a real example
A forex & trade-finance officer in Indore is helping a customer file a FEMA compounding application for a delayed foreign investment. She reminds the customer to attach their income-tax PAN and the correct NIC code 1987 for their business activity, and to provide their bank account details for a possible NEFT refund. She knows that missing these fields will cause the application to be returned, wasting everyone's time.
What changed
RBI now credits compounding fee refunds via NEFT instead of cheques, requiring applicants to provide bank mandate details upfront. The annexes for FDI, ECB, ODI, and Branch/Liaison Office applications have been updated to include income-tax PAN and activity as per NIC codes 1987 as mandatory fields.
What it means for you
Banks and their customers must ensure FEMA compounding applications are complete with all prior approvals to avoid returns. The shift to NEFT refunds speeds up the process, but missing PAN or NIC code will now lead to automatic rejection. This reduces back-and-forth correspondence and streamlines the compounding process.
What you must do
Advise customers to submit compounding applications only after obtaining all required approvals and completing transactions.
Ensure applicants provide bank account mandate details (as per Annex) for NEFT refunds.
Verify that FDI, ECB, ODI, and Branch/Liaison Office applications include income-tax PAN and NIC code 1987.
Remind customers to update any change in address/contact details during pendency of the application.
Who it affects
All Category-I Authorised Dealer Banks, Applicants for compounding of FEMA contraventions, Customers dealing with FDI, ECB, ODI, and Branch/Liaison Office matters
❓ Common questions
What happens if my compounding application is returned?
The application fee of Rs. 5000 will be refunded via NEFT to the bank account you provide. Ensure you submit the mandate details to avoid delays.
What are the new mandatory fields in the application annexes?
The annexes for FDI, ECB, ODI, and Branch/Liaison Office now require income-tax PAN and the activity as per NIC codes 1987. Applications without these will be treated as incomplete.
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/176
A.P. (DIR Series) Circular No. 20
August 12, 2013
To,
All Category - I Authorised Dealer Banks
Madam / Sir,
Foreign Exchange Management Act, 1999 (FEMA)
Foreign Exchange (Compounding Proceedings) Rules, 2000 (the Rules) -
Compounding of Contraventions under FEMA, 1999
Attention of Authorised Dealers (ADs) and their constituents is invited to paragraph 7.2 of A.P. (DIR Series) Circular No. 56 dated June 28, 2010 wherein they were advised to ensure that the applications for compounding are submitted only after the transactions are complete and all the requisite approvals are in place. Of late, we have been receiving a number of applications for compounding of contraventions of FEMA, 1999 which are submitted without obtaining proper approvals or permission from the concerned authorities leading to avoidable correspondence with the applicants and also return of applications. In case the application has to be returned for this reason or any other reason, the application fees of Rs.5000/- received along with the application fees is also returned.
2. To expedite the refund of compounding fees in such cases, it has been decided to credit the same to the applicant’s account through NEFT. The applicants are advised to furnish their mandate and details of their bank account as per ANNEX along with the application in the prescribed format and other documents required to be submitted in terms of the instructions contained in A.P. (DIR Series)Circular Nos. 56 and 57 dated June 28, 2010 and December 13, 2011 respectively.
3. Further, the Annexes relating to Foreign Direct Investment, External Commercial Borrowings, Overseas Direct Investment and Branch Office / Liaison Office, as given in A.P.(Dir Series) Circular No.57 dated December 13, 2011 , have also been modified to include the details of income-tax PAN and the activity as per NIC codes – 1987. It may please be noted that the application will be treated as incomplete without these details.
4. The applicants may also note to bring to the notice of the compounding authority change, if any, in the address/contact details of the applicant during the pendency of the compounding application with Reserve Bank.
5. Authorised Dealers may bring the contents of this circular to the notice of their constituents and customers concerned.
6. The directions contained in this circular have been issued under sections 10 (4) and 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999).
Yours faithfully,
(Rudra Narayan Kar)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/176 · issued 12 Aug 2013. The plain-English explanation above is BankPulse’s own independent summary.
Verify that FDI, ECB, ODI, and Branch/Liaison Office applications include income-tax PAN and NIC code 1987.
💻 IT / Systems
Advise customers to submit compounding applications only after obtaining all required approvals and completing transactions.
Remind customers to update any change in address/contact details during pendency of the application.
📜 Compliance
Ensure applicants provide bank account mandate details (as per Annex) for NEFT refunds.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an IT/Systems lead at a bank this circular applies to (All Category-I Authorised Dealer Banks, Applicants for compounding of FEMA contraventions, Customers dealing with FDI, ECB, ODI, and Branch/Liaison Office matters), your first concrete step on “FEMA Compounding: Faster Refunds & New Mandatory Fields” is: “Advise customers to submit compounding applications only after obtaining all required approvals and completing transactions.” (RBI issued this 12 Aug 2013).
Action required: Advise customers to submit compounding applications only after obtaining all required approvals and completing transactions.
Action required: Ensure applicants provide bank account mandate details (as per Annex) for NEFT refunds.
Action required: Verify that FDI, ECB, ODI, and Branch/Liaison Office applications include income-tax PAN and NIC code 1987.
Action required: Remind customers to update any change in address/contact details during pendency of the application.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8301&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
Help us keep this accurate
Found an inaccuracy or have an improvement? Tell us. Every report is reviewed by our team before any change is made — nothing goes live unverified.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
BANKPULSE · FREE DAILY BRIEF
Get RBI updates for your role
Every important RBI update, decoded in plain English — for your career, exams & financial awareness.
We collect only your email, name and role, used solely to send your brief — never sold or shared. Withdraw anytime via the unsubscribe link in any email. Independent platform, not affiliated with the RBI. Information, not legal advice.
REPORT AN ERROR · BETA
Spotted an error? Earn 500 BankPulse Credits
Help us stay accurate. If your correction is verified true and approved by our founder, you earn 500 BankPulse Credits — redeemable when the platform monetises.
Reviewed by a human before any credit is awarded. We never change the site from crowd input without verification.
WANT A NEW FEATURE · BETA
What would make BankPulse more useful for you?
Tell us what to build next — a tool, a data view, a role page, anything. We read every suggestion.
Thank you — your ideas directly shape what we build.